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HomeMy WebLinkAboutAGENDA REPORT 2009 0318 CC REG ITEM 10G 10aGe VF TIEM -- It MOORPAi K9 ICA- � city Council Meeting �raL/I- ACTION: 'Mid 99 NFAMM AR�01 MOORPARK CITY COUNCIL AGENDA REPORT ; TO: Honorable City Council FROM: Ron Ahlers, Finance Director62-A- DATE: March 6 2009 Cit Council meeting of March 18, 2009) 2009 (City SUBJECT: Consider Approving External Auditors' Engagement Letter for Fiscal Year 2008/09 Audit BACKGROUND Annually the City of Moorpark engages the services of a CPA firm to perform an audit of the financial statements of the City. We currently contract with the firm of Teaman, Ramirez & Smith, Inc. Certified Public Accountants {TRS} for these services. The attached "Engagement Letter" is a communication tool by the auditors to the City Council of the City of Moorpark. DISCUSSION At the beginning of each audit cycle the external auditors send out an "Engagement Letter" to the City Council which stipulates the work that the auditors will perform for the upcoming audit. Auditing standards (SAS 114) require that this letter be sent to the governing board of the corporation and that the City sign a copy of the letter and return the same to the external auditors. The City has made one correction to the letter. The last page, second sentence originally read, "Our fees for these services will be in accordance with our proposal dated January 19, 2007." It now reads, "Our fees for these services will be in accordance with professional services agreement dated May 8, 2007." The professional services agreement is signed by both TRS and the City and governs the services provided by TRS and the compensation paid by the City. The a En ement Letter is attached for your review and approval. Engagement . 000192 Honorable City Council February 3, 2009 Page 2 STAFF RECOMMENDATION Approve the external auditors' engagement letter, with modifications, for fiscal year 2008/09 and authorize the City Manager to sign on behalf of the City of Moorpark. Attachment A: TRS Engagement Letter for Fiscal Year 2008/09 000IL93 RECEIVED TEAMAN,RAVIREZ&SMITH,INC. ATTACHMENT A 70RSCERTIFIED PUBLIC ACCOUNTANTS FEB 2 6 2009 FINANCE DEPARTMENT February 24, 2009 The Honorable Mayor and City Council City of Moorpark 799 Moorpark Avenue Moorpark,CA 93 021 We are p leased to confirm our understanding of the services we are to provide the City of Moorpark for the y ear ending June 30, 2009. We will audit the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information, which collectively comprise the entity's basic financial statements, of the City of Moorpark and the Moorpark Redevelopment Agency, as of and for the year ending June 30, 2009. Accounting standards generally accepted in the United States provide for certain required supplementary information (RSI), such as management's discussion and analysis(MD&A),to accompany the City's basic financial statements. As part of our engagement, we will apply certain limited procedures to the City's RSI. These limited procedures will consist principally of inquiries of management regarding the methods of measurement and p resentation,which management is responsible for affirming to us in its representation letter. Unless we encounter p roblems with the presentation of the RSI or with procedures relating to it,we will disclaim an opinion on it. The following RSI is required by generally accepted accounting principles and will be subjected to certain limited procedures,but will not be audited: Management's Discussion and Analysis Budgetary Comparison Schedules Supplementary Pension Information Supplementary information other than RSI also accompanies the City's basic financial statements. We pp �'y will subject the following supplementary information, as applicable,to the auditing procedures applied in our audit of the basic financial statements and will provide an opinion on it in relation to the basic financial statements: Schedule of Expenditures of Federal Awards Combining Statements Individual Fund Statements Other Supplementary Schedules The followin g additional information accompanying the basic financial statements, as applicable, will not be subjected to the auditing procedures applied in our audit of the financial statements, and for which our auditors report will disclaim an opinion. , Statistical Schedules 000194 Richard A.Teaman, CPA • Greg W. Fankhanel, CPA• David M. Ramirez, CPA • Javier H. Carrillo, CPA 4201 Brockton Ave. Suite 100, Riverside CA 92501 • 951.274.9500 • 951.274.7828 FAX • www.trscpas.com R r Audit Objectives The objective of our audit is the expression of opinions as to whether your basic financial statements are fairly presented, in all material respects, in conformity with U.S. generally accepted accounting principles and to report on the fairness of the additional information referred to in the first paragraph when considered in relation to the basic financial statements taken as a whole.The objective also includes reporting on- • Internal control related to the financial statements and compliance with laws, regulations, and the provisions of contracts or grant agreements,noncompliance with which could have a material effect on the financial statements in accordance with Government Auditing Standards. • Internal control related to major programs and an opinion(or disclaimer of opinion)on compliance with laws, regulations, and the provisions of contracts or grant agreements that could have a direct and material effect on each major program in accordance with the Single Audit Act Amendments of 1996 and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. The reports on internal control and compliance will each include a statement that the report is intended for p p the information and use of the management,the body or individuals charged with governance, others within the entity, specific legislative or regulatory bodies, federal awarding agencies, and if applicable, pass- through entities and is not intended to be and should not be used by anyone other than these specified parties. Our audit will be conducted in accordance with generally accepted auditing standards established by the Auditing Standards Board (United States); the standards for financial audits contained in Government Auditin g Standards, issued by the Comptroller General of the United States; the Single Audit Act Amendments of 1996; and the provisions of OMB Circular A-133, and will include tests of accounting records, a determination of major program(s) in accordance with OMB Circular A-133, and other procedures we consider necessary to enable us to express such opinions and to render the required reports. If our opinions on the financial statements or the Single Audit compliance opinions are other than unqualified, we will fully discuss the reasons with you in advance. If, for any reason, we are unable to complete the audit or are unable to form or have not formed opinions,we may decline to express opinions or to issue a report as a result of this engagement. Management Responsibilities Management is responsible for the basic financial statements and all accompanying information as well as all representations contained therein. As part of the audit, we will prepare a draft of your financial statements, schedule of expenditures of federal awards, and related notes. You are responsible for making all management decisions and performing all management functions relating to the financial statements, schedule of expenditures of federal awards, and related notes and for accepting full responsibility for such decisions. You will be required to acknowledge in the management representation letter that you have reviewed and approved the financial statements, schedule of expenditures of federal awards, and related notes p rior to their issuance and have accepted responsibility for them.Further,you are required to designate an individual with suitable skill,knowledge, or experience to oversee any nonaudit services we provide and for evaluating the adequacy and results of those services and accepting responsibility for them. responsible Management is for establishing and maintaining internal controls, including monitoring g p ongoing activities; for the selection and application of accounting principles;for the fair presentation in the financial statements of the respective financial position of the governmental activities, the business- type activities, the aggregate discretely presented component units, each major fund, and the aggregate 000195 remaining fund information of the City and the respective changes in financial position and, where applicable, cash flows in conformity with U.S. generally accepted accounting principles; and for federal award program compliance with applicable laws and regulations and the provisions of contracts and grant agreements. Management is also responsible for making all financial records and related information available to us, including identifying significant vendor relationships in which the vendor has responsibility for program compliance and for the accuracy and completeness of that information. Your responsibilities include adjusting the financial statements to correct material misstatements and confirming to us in the representation letter that the effects of any uncorrected misstatements aggregated by us during the current an engagement d pertaining to the latest period presented are immaterial, both individually and in the aggregate,to the financial statements taken as a whole. You are responsible for the design and implementation of programs and controls to prevent and detect fraud, and for informing us about all known or suspected fraud or illegal acts affecting the government involving (1) management, (2) employees who have significant roles in internal control, and (3) others where the fraud or illegal acts could have a material effect on the financial statements. Your responsibilities include informing us of your knowledge of any allegations of fraud or suspected fraud or illegal acts affecting the government received in communications from employees, former employees, grantors, regulators, or others. In addition,you are responsible for identifying and ensuring that the entity pp complies with applicable laws, regulations, contracts, agreements, and grants. Additionally, as required p by OMB Circular A-133, it is management's responsibility to follow up and take corrective action on reported audit findings and to prepare a summary schedule of prior audit findings and a corrective action plan. Management is responsible for establishment and maintenance of a process for tracking the status of audit findings and recommendations. Management is also responsible for identifying for us previous audits or other engagements or studies related to the objectives discussed in the Audit Objectives section of this letter. This responsibility includes relaying to us corrective actions taken to address significant findings and recommendations resulting from those audits or other engagements or studies. You are responsible for providing management's views on our current findings, conclusions, and recommendations, as well as your planned corrective actions,and the timing and format related thereto. Planned Scope and Timing of the Audit The audit will be conducted in two phases. The first phase will be conducted prior to year-end, and will include preliminary and planning activities. This will include an evaluation of the City's internal controls over financial reporting and compliance, and the implementation of those controls, along with other activities. We will also calculate materiality levels for the various opinion units in the City's financial statements, considering factors such as total assets and total revenues. The second phase of the audit will be conducted at a date subsequent to year-end. This phase will include year-end audit procedures and preparation of the applicable reports. Audit Procedures-General An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; therefore, our audit will involve judgment about the number of transactions to be examined and the areas to be tested. We will plan and perform the audit to obtain reasonable rather than absolute assurance about whether the financial statements are free of material misstatement,whether from (1) errors, (2) fraudulent financial reporting, (3) misappropriation of assets, or (4) violations of laws or governmental regulations that are attributable to the entity or to acts by management or employees acting (300196 on behalf of the entity. Because the determination of abuse is subjective,Government Auditing Standards do not expect auditors to provide reasonable assurance of detecting abuse. As required by the Single Audit Act Amendments of 1996 and OMB Circular A-133, our audit will include tests of transactions related to major federal award programs for compliance with applicable laws and regulations and the provisions of contracts and grant agreements. Because an audit is designed to provide reasonable, but not absolute assurance and because we will not perform a detailed examination of all transactions, there is risk that material misstatements or noncompliance may exist and not be detected by us. In addition, an audit is not designed to detect immaterial misstatements or violations of laws or governmental regulations that do not have a direct and material effect on the financial statements or major programs. However, we will inform you of any material errors and any fraudulent financial reporting or misappropriation of assets that come to our attention. We will also inform you of any violations of laws or governmental regulations that come to our attention,unless clearly inconsequential. We will include such matters in the reports required for a Single Audit. Our responsibility as auditors is limited to the period covered by our audit and does not extend to any later periods for which we are not engaged as auditors. Our p rocedures will include tests of documentary evidence supporting the transactions recorded in the accounts, and may include tests of the physical existence of inventories, and direct confirmation of receivables and certain other assets and liabilities by correspondence with selected individuals, creditors, and financial institutions. We will request written representations from your attorneys as part of the engagement, Y may ement, and the bill you for responding to this inquiry. At the conclusion of our audit, we will Y also require certain written representations from you about the financial statements and related matters. Audit Procedures-Internal Controls Our audit will include obtaining an understanding of the entity and its environment, including internal control, sufficient to assess the risks of material misstatement of the financial statements and to design the nature, timing, and extent of further audit procedures. Tests of controls may be performed to test the effectiveness of certain controls that we consider relevant to preventing and detecting errors and fraud that are material to the financial statements and to preventing and detecting misstatements resulting from illegal acts and other noncompliance matters that have a direct and material effect on the financial statements. Our tests, if p erformed,will be less in scope than would be necessary to render an opinion on internal control and, accordingly, no opinion will be expressed in our report on internal control issued pursuant to Government Auditing Standards. As required by OMB Circular A-133, we will perform tests of controls over compliance to evaluate the effectiveness of the design and operation of controls that we consider relevant to preventing or detecting material noncompliance with compliance requirements applicable to each major federal award program. However, our tests will be less in scope than would be necessary to render an opinion on those controls and, accordingly, no opinion will be expressed in our report on internal control issued pursuant to OMB Circular A-133. An audit is not designed to provide assurance on internal control or to identify significant deficiencies. However, during the audit, we will communicate to management and those charged with governance internal control related matters that are required to be communicated under professional standards, Government Auditing Standards, and OMB Circular A-13 3. OOOJL97 Audit Procedures—Compliance A s p g art of obtaining reasonable assurance about whether the financial statements are free of material misstatement, we will perform tests of the City of Moorpark's compliance with applicable laws and regulations and the provisions of contracts and agreements, including grant agreements. However, the objective of those procedures will not be to provide an opinion on overall compliance and we will not express such an opinion in our report on compliance issued pursuant to Government Auditing Standards. OMB Circular A-133 requires that we also plan and perform the audit to obtain reasonable assurance about whether the auditee has complied with applicable laws and regulations and the provisions of contracts and grant agreements applicable to major programs. Our procedures will consist of the applicable procedures described in the OMB Circular A-133 Compliance Supplement for the types of compliance requirements that could have a direct and material effect on each of the City of Moorpark's major programs. The purpose of those procedures will be to express an opinion on the City of Moorpark's compliance with requirements applicable to each of its major programs in our report on compliance issued pursuant to OMB Circular A-133. Audit Administration,Fees,and Other We understand that your employees will prepare all confirmations we request and will locate any documents selected by us for testing. At the conclusion of the engagement, we will complete the appropriate sections of and sign the Data Collection Form that summarizes our audit findings. We will provide copies of our reports to the City of Moorpark; however, it is management's responsibility to submit the reporting package (including financial statements, schedule of expenditures of federal awards, summary schedule of prior audit findings, auditors' reports, and a corrective action plan) along with the Data Collection Form to the designated federal clearinghouse and, if appropriate, to pass-through entities. The Data Collection Form and the reporting package must be submitted within the earlier of 30 days after receipt of the auditors' reports or nine months after the end of the audit period, unless a longer period is agreed to in advance by the cognizant agency izant or oversight a for audits. At the conclusion of the engagement, we will provide y information to management as to where the reporting packages should be submitted and the number to submit. The audit documentation for this engagement is the property of Teaman, Ramirez & Smith, Inc. and constitutes confidential information. However, pursuant to authority given by law or regulation, we may be requested to make certain audit documentation available to federal cognizant and grantor agencies, or its designee, a federal agency providing direct or indirect funding, or the U.S. Government Accountability Office for purposes of a quality review of the audit, to resolve audit findings, or to carry out oversight responsibilities. We will notify you of any such request. If requested, access to such audit documentation will be provided under the supervision of our firm. Furthermore, upon request, we may provide photocopies of selected audit documentation to the aforementioned parties. These parties may intend, or decide, to distribute the photocopies or information contained therein to others, including other governmental agencies. In such cases, Teaman, Ramirez & Smith, Inc. is not responsible for the distribution of the photocopies or information contained therein. The audit documentation for this engagement will be retained for a minimum of five years after the report release or for any additional period requested by the federal cognizant and grantor agencies. If we are aware that a federal awarding agency, pass-through entity, or auditee is contesting an audit finding, we will contact the ply(ies) contesting the audit finding for guidance prior to destroying the audit documentation. OOOJL98 professional services agreement is May. 8 2007 . Greg Fankhanel is the engagement partner and s responsible for supervisinj the engagement and signing the report. Our fees for these services will be in accordance with • Our invoices for these fees will be rendered each month as work progresses and are payable on presentation. In accordance with our firm policies, work may be suspended if your account becomes 90 days or more overdue and may not be resumed until your account is paid in full. If we elect to terminate our services for nonpayment, our engagement will be deemed to have been completed upon written notification of termination, even if we have not completed our report(s). You will be obligated to compensate us for all time expended and to reimburse us for all out-of-pocket costs through the date of and anticipated cooperation from our termination. Our fees are based on the current audit scope a p p y personnel, and the assumption that unexpected circumstances will not be encountered during the audit. If • additional it with you and arrive at a new fee estimate before significant additional time is necessary,we will discuss y we incur the additional costs. We appreciate the opportunity to be of service to the City of Moorpark and believe this letter accurately summarizes the significant terms of our engagement. If you have any questions,please let us know. If you agree with the terms of our engagement as described in this letter, please sign the enclosed copy and return it to us. Very truly yours, TEAMAN9 RAMIREZ& SMITH,INC. Greg W.Fankhanel Certified Public Accountant Response: This letter correctly sets forth the understanding of the City of Moorpark. Signature: Title: Date: 000IL99